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What is RSI Crypto?
RSI Crypto - The relative strength index (RSI) is a momentum indicator that shows the overbought or oversold situation of an asset or cryptocurrency. Simply put, the RSI is an oscillator that calculates the high and low bands between two opposite values, while estimating the magnitude of price variations and the speed of these variations. Due to the volatility of the stock and crypto markets, technical indicators provide guidance for planning entry and exit points. Therefore, the RSI is a reliable indicator for crypto traders.
RSI Indicator Function
The relative strength index (RSI) is a momentum indicator used in technical analysis. The RSI measures the speed and magnitude of recent price changes in a security to evaluate whether the security is overvalued or undervalued. The RSI can do more than simply indicate overbought and oversold securities. It can also indicate securities that may be ready for a trend reversal or a corrective pullback. It can signal when to buy and sell. Traditionally, an RSI reading of 70 or above indicates an overbought situation. A reading of 30 or below indicates an oversold condition. Other functions of the RSI include:- Traders can use RSI to predict the price behavior of a security.
- Helps traders validate trends and trend reversals.
- Can indicate overbought and oversold securities.
- Can provide short-term traders with buy and sell signals.
- A technical indicator that can be used with others to support a trading strategy.
How to Read RSI
Reading the RSI takes some practice. Like most indicators, the RSI can give a lot of false alarms, and it is crucial to identify the all-important bullish or bearish indications. In order to trade the RSI successfully, you want to combine its signals with other indicators to ultimately get the highest probability of truth. Once you learn the RSI in crypto, you can apply it to any other market. The word bullish: indicates that buying is stronger than selling, and market sentiment is positive. The word bearish: indicates that selling is stronger than buying, and market sentiment is negative.
BTC/USDT 1H – RSI indicator. The best RSI settings for the 1-hour chart are the standard settings, and are suitable for any timeframe.
How to Use RSI Indicator for Trading
Open MT4 and go to File > Open Data Folder , then select MQL4/5 > 'Experts' or 'Indicators' and paste the MQL4/EX4 or MQL5/EX5 file into this directory. When you reopen the platform you will now see your custom EA/Indicator in the Navigator window. You can drag and drop it onto the chart of your choice.Overbought and Oversold
Generally, when the RSI indicator crosses 30 on the RSI chart, it is a bullish sign and when it crosses 70, it is a bearish sign. In other words, one can interpret that an RSI reading of 70 or above indicates that a security is becoming overbought or overvalued. This may be primed for a trend reversal or a corrective price pullback. An RSI reading of 30 or below indicates an oversold or undervalued condition. Overbought refers to a security that is trading at a price level above its true (or intrinsic) value. That means the price is above where it should be, according to practitioners of either technical analysis or fundamental analysis. Traders who see indications that a security is overbought may expect a price correction or trend reversal. Hence, they may sell the security. The same idea applies to a security that a technical indicator such as the relative strength index highlights as oversold. This can be viewed as trading at a lower price than it should be. Traders who notice such indications may expect a price correction or trend reversal and buy the security.Divergence
RSI divergence occurs when price moves in the opposite direction to the RSI. In other words, the chart may display a change in momentum before a corresponding change in price. Bullish divergence occurs when the RSI displays an oversold reading followed by a higher low that occurs with a lower low in price. This may indicate increasing bullish momentum, and a break above the oversold region can be used to trigger a new long position. Bearish divergence occurs when the RSI creates an overbought reading followed by a lower high that occurs with a higher high in price. As you can see in the following chart, bullish divergence is identified when the RSI forms a higher low as price forms a lower low. This is a valid signal, but divergence can be rare when a stock is in a stable long-term trend. Using flexible oversold or overbought readings will help identify more potential signals.
RSI Indicator Example
This is how we get the RSI value. The RSI indicator chart is always drawn in relation to the closing price.
That is a discussion of RSI Crypto, you can try using the RSI indicator directly by practicing and registering for the GICTrade application!
